Sterling plummeted to its lowest since May 2009 against the dollar this morning as Euro-Zone fiscal woes spurred risk aversion. This pushed the euro up to its strongest in two weeks whilst investors await Wednesday’s BoE inflation report.

Pound Sterling – UK Markets

The pound hit a low of USD1.5535 earlier this morning and has made little ground to recover at the time of writing as fears about the fiscal health of some Euro-Zone countries resulted in risk-aversion selling. Analysts believe sterling may suffer as a result of more selling pressure as concerns about sovereign debt highlight Britain's own murky fiscal position and increase risk aversion. There is also a growing feeling amongst speculators that this year’s election may produce a stalemate. Investors’ eyes will also be on the BoE's quarterly Inflation Report on Wednesday, when the central bank is expected to cut its 2010 growth forecast whilst upping its consumer price outlook.

US Dollar – US Markets

The greenback was significantly stronger across the board at the end of Friday's trading. A combination of strong US jobs data and European economic sovereign debt fears pushed the dollar higher as investors cut their exposure to risky assets and look to the dollar. Today sees it trading at 0.7303 versus the euro, staying firm on the back of the single currency’s weakness.

Euro – European Markets

The weekend's G7 meeting delivered nothing more than rhetoric with respect to mapping out a strategy to tackle European sovereign debt issues, keeping the euro under pressure. The G7 communiqué issued by the finance ministers acknowledge sovereign debt concerns and went on to state that the G7 members should set "clear, credible and consistent" plans to strengthen their budgets. It also pledged to soldier on with economic stimulus measures, even as investors continue to avoid riskier assets as Portugal, Ireland, Greece and Spain maintain their struggle out of recession. At time of writing the euro traded at 0.8793 against the pound.

Other Currencies – Highlights

The South African rand and the Canadian dollar advanced versus the yen and the US dollar as gains in stocks stoked demand for higher-yielding currencies. The rand rose against 16 of the most-traded currencies and the Canadian dollar strengthened a second day as US stock futures advanced.